TMI Blog2012 (11) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision of sec 68 in respect of realization of debtors arising out of sale on credit n the earlier year and whereas part of debtors were realised during the year under consideration. 4. That on the fact and circumstances of the case Ld. CIT (A), Kolkata erred in not appreciating the fact that debtors as on 31/03/2005 was to the extent of R.75445999/- which was subsequently reduced to ₹ 52069195/ and whereas entire realised amount from debtors amounting to ₹ 23706226/- were deposited in bank and creditors were paid by A/c Payee cheque. 5. That on the fact and circumstances of the case Ld. CIT (A), Kolkata erred in not appreciating the fact that provision of sec 68 is not applicable in case of substitution of one asset by another asset as there was either any advance nor any deposit received from any party 6. That on the fact and circumstances of the case Ld. CIT (A), Kolkata erred in traveling beyond the subject matter of assessment ignoring the fact that he has no power of enhancement relating to any income which has not been subject matter of assessment. 7. The appellant prays for deletion of the entire addition made by the assessing officer and also en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. had to complete the assessment exparte on whatever little information was available with him at that time. He acted very reasonably and added only half of the cash deposited in the joint bank account believing that in a joint account of two persons only half of the amount can be taxed in the hands of one person. During appellate proceedings the assessee came with an explanation that the cash of about Rs,50,00,000/- deposited in the above mentioned joint bank account was a part of the cash of ₹ 2,37,06,226/- received from debtors of his proprietory concern M/s. Rajeev Trading Co. to whom timber was sold during financial year 2004-05. Here, we have to understand that when the assessee is showing receipt of cash from the debtors of last year he is crediting this cash in his books of accounts in the ledger accounts of the debtors. Thus, it is clearly a cash credit in the books of accounts of the proprietory concern of the assessee. The provisions of section 68 of the I T Act, 1961 are as follows: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom the money was claimed to be received, (ii) the capacity of such persons to give the money and (iii) the genuineness of the transaction. To prove these three aspects the first important thing was that the assessee should identify the persons from whom he claimed to have received this cash. The assessee has given only the names of the persons who are claimed to be the debtors of his timber business claimed to be carried on last year. When he was asked to provide the addresses of these persons and also show the bills of last year through which sales were made to these parties he refused to provide these details saying these documents had been misplaced and the addresses of the parties were not entered in the computer. In his submission reproduced above the AR of the assessee has objected to requisitioning of these details on the ground that these details cannot be called as they are related to earlier years. This argument of the AR cannot be accepted because the genuineness of the transaction i.e. whether the goods were actually sold to the parties shown as debtors or not can be determined only by the sale bills of last year. Since the sale bills are important document to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hance the income of the assessee by ₹ 2,12,06,226/- over and above ₹ 25,00,000/- added by the AO. Without prejudice to his arguments discussed above the AR of the assessee has taken an alternative argument. He has submitted that sundry debtors of the assessee have already been reduced from ₹ 7,54,45,999/- to ₹ 5,20,69,195/- on account of realization of the debtors. If the amount of reduction is added as unexplained cash credit u/s 68 of the I T Act. it would mean that no realization has been made against the sundry debtors. In such a scenario, the sundry debtors, already reduced by the assessee, shall have to be treated as bad debts written off due to reduction in balance which will result in business loss of the assessee. Now the action proposed to be made as unexplained cash credit u/s 68 of the Act shall have to be set off against the said business loss resulting in the same net profit as disclosed by the assessee. Thus, the profit of the assessee will not be affected even after the proposed addition is made owing to the fact that sundry debtors have already been eliminated and cognizance of this fact has to be taken by the Department. This argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,305/- which was duly offered for taxation and accepted by the Revenue. The closing debtors as on 31.3.2005 as per the balance sheet is ₹ 7,54,45,999/- since most of the sales were made on credit. Similarly the closing creditors are also at ₹ 7,91,60,460/- as most of the purchases are made on credit. The assessee maintained two separate bank accounts and all the receipts are deposited in both the said bank accounts. During the assessment year 2006-07 which is under disputed the assessee has realized ₹ 2,33,76,804/- from the date standing as on 31.03.2005. The entire realization was made in cash. Out of the said realization an amount of ₹ 2,20,71,875/- was duly deposited by the assessee in his two bank accounts. The details of realization are also quoted by the CIT(A) at page of his order. Again out of the said bank deposit payments were made to the sundry creditors to the tune of ₹ 2,01,97,323/-. No rejection of books of accounts has been made by the Revenue authorities. The issue that the realization from debtors forms the source of the income in the hands of assessee was not raised and discussed by AO that mens rea realization from debtors are not t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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